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Debt Contracts, Collapse and Regulation as Competition Phenomena

Gersbach, Hans; Uhlig, Harald - C.E.P.R. Discussion Papers - 1997

lenders, which may make lending altogether unprofitable. Second, banks can have an incentive to offer a debt contract and … additional equity contracts to intermediate debtors, which is in turn dominated by a simple debt contract, only attractive for … seek to avoid the contract with the highest chance of delivery: that contract attracts all bad entrepreneurs. …

Persistent link: https://www.econbiz.de/10005661861

The Political Economy of Finance

Pagano, Marco; Volpin, Paolo - C.E.P.R. Discussion Papers - 2002

The regulations that shape the design and the operations of corporations, credit and securities markets differ vastly from country to country. In addition, similar regulations are often unequally enforced in different countries. Economists still have an imperfect understanding of why these...

Persistent link: https://www.econbiz.de/10005124338

Regulatory Sanctions and Reputational Damage in Financial Markets

Armour, John; Mayer, Colin; Polo, Andrea - C.E.P.R. Discussion Papers - 2010

We study the impact of the announcement of enforcement of financial and securities regulation by the UK’s Financial Services Authority and London Stock Exchange on the market price of penalized firms. Since these agencies do not announce enforcement until a penalty is levied, their actions...

Persistent link: https://www.econbiz.de/10008682887

Loan Pricing Under Basel Capital Requirements

Repullo, Rafael; Suarez, Javier - C.E.P.R. Discussion Papers - 2003

We analyse the implications for the pricing of bank loans of the reform of capital regulation known as Basel II. We consider a perfectly competitive market for business loans where, as in the model underlying the internal ratings based (IRB) approach of Basel II, a single risk factor explains...

Persistent link: https://www.econbiz.de/10005792161

Economic and Regulatory Capital: What is the Difference?

Elizalde, Abel; Repullo, Rafael - C.E.P.R. Discussion Papers - 2004

This Paper analyses the determinants of regulatory capital (the minimum required by regulation) and economic capital (the capital that shareholders would choose in absence of regulation) in the context of the single risk factor model that underlies the New Basel Capital Accord (Basel II). The...

Persistent link: https://www.econbiz.de/10005123827

The Manipulation of Basel Risk-Weights

Mariathasan, Mike; Merrouche, Ouarda - C.E.P.R. Discussion Papers - 2013

In this paper, we examine the relationship between banks’ approval for the internal ratings-based (IRB) approaches of Basel II and the ratio of risk-weighted over total assets. Analysing a panel of 115 banks from 21 OECD countries that were eventually approved for applying the IRB to their...

Persistent link: https://www.econbiz.de/10011083229

Macroeconomics after the crisis – hedgehog or fox?

Miller, Marcus; Zhang, Lei - C.E.P.R. Discussion Papers - 2014

Following the financial crisis of 2008/9, there has been renewed interest in what Greenwald and Stiglitz dubbed ‘pecuniary externalities’. Two that affect borrowers and lenders balance sheets in pro-cyclical fashion are described, along with measures that might help curb their destabilising...

Persistent link: https://www.econbiz.de/10011083632

Bailouts And Moral Hazard: How Implicit Government Guarantees Affect Financial Stability

Mariathasan, Mike; Merrouche, Ouarda; Werger, Charlotte - C.E.P.R. Discussion Papers - 2014

The recent crisis has shown that banks in distress can often expect to benefit from (implicit) government guarantees. This paper analyzes a panel of 781 banks from 90 countries to test whether the expectation of individual and systemic government support induces moral hazard. It shows that banks...

Persistent link: https://www.econbiz.de/10011145454

Information Contagion and Inter-Bank Correlation in a Theory of Systemic Risk

Acharya, Viral V; Yorulmazer, Tanju - C.E.P.R. Discussion Papers - 2003

Two aspects of systemic risk, the risk that banks fail together, are modeled and their interaction examined. First, the ex-post aspect, in which the failure of a bank brings down a surviving bank as well, and second, the ex-ante aspect, in which banks endogenously hold correlated portfolios...

Persistent link: https://www.econbiz.de/10005504423

A Theory of Systemic Risk and Design of Prudential Bank Regulation

Acharya, Viral V - C.E.P.R. Discussion Papers - 2009

Systemic risk is modeled as the endogenously chosen correlation of returns on assets held by banks. The limited liability of banks and the presence of a negative externality of one bank’s failure on the health of other banks give rise to a systemic risk-shifting incentive where all banks...

Persistent link: https://www.econbiz.de/10004980206